Bone Morphogenetic protein 4 (BMP4) has been implicated in many aspects of embryonic development, ranging from establishment of the basic embryonic axis to morphogenesis of individual organs. BMP-4 is synthesized as a large inactive precursor protein that is sequentially cleaved at two evolutionarily conserved sites within the inactive prodomain to yield active carboxy-terminal dimers. The first cleavage occurs at a site adjacent to the mature ligand domain to yield the 1 5kDa BMP-4 ligand. The second cleavage (S2) occurs upstream of the SI site to generate a 32 kDa N-terminal prodomain fragment and a small "linker" peptide (the amino acids between the S2 and SI sites). This ordered proteolysis regulates the activity and signaling range of the mature ligand, possibly by regulating stability of the ligand. Mutations that result in simultaneous cleavage at both sites of proBMP-4 greatly increase, and mutations that abolish the second cleavage greatly decrease the activity and signaling range of mature BMP-4. Based on these results, we hypothesize that ordered proteolytic processing is an important regulator of BMP-4 activity in vivo. To stringently test this hypothesis and to begin to examine molecular mechanisms by which cleavages in the prodomain influence the activity of mature BMP-4 I will: analyze the contributions of the N-terminal prodomain fragment, the linker peptide, and the mature ligand in regulating BMP-4 activity and study the developmental consequences of altering BMP-4 cleavage in the mouse by analyzing a BMP4 cleavage mutant "knock-in" mouse. Collectively, these studies will help to elucidate the role of proteolysis in controlling protein activity.